Japan announced Thursday that it had stepped in to support the yen’s value for the first time in 24 years, in an attempt to stem the currency’s continued depreciation against the dollar.
The yen has depreciated more than 20% against the dollar over the past year, putting pressure on Japan’s economy as the cost of importing many essential commodities such as energy and food rises. The sharp decline in the yen is largely caused by Japan’s determination to keep interest rates low despite the US Federal Reserve raising interest rates and boosting the dollar to combat inflation.
The Japanese yen crossed 145 yen against the dollar on Thursday after the Fed announced a day earlier that it would raise its policy rate by another three-quarters percentage point to a range of 3-3.25%.
At a press conference on Thursday, Japan’s Finance Minister Shunichi Suzuki said the government was “concerned about rapid one-way movements” in the currency and said it would “never overlook excessive volatility stemming from speculative activity.” I can’t,” he added. “
Japan has warned in recent months that it could intervene if necessary, and hopes that alone will help keep the yen from depreciating.
Now government officials are “ready to take action 24/7,” Finance Vice Minister Masato Kanda told reporters after the announcement.
In previous times, a weaker yen was widely seen as a boon to Japan’s export-driven economy, making Japanese products cheaper and more attractive to overseas consumers, and increasing the value of overseas earnings. rice field.
But as the economy globalizes and many manufacturers move production overseas, the benefits are no longer so simple. The weaker yen is particularly problematic as the pandemic and the war in Ukraine have pushed up the cost of a wide range of imports.
For some products, prices have begun to rise significantly for the first time in 30 years.
The Japanese government’s intervention on Thursday followed the Bank of Japan’s announcement that it would stick to its longstanding ultra-low interest rate policy, even as most other countries have begun to follow the Federal Reserve’s rate hikes.
Low interest rates have been an important part of Japan’s economic policy for almost a decade. This was introduced to boost low inflation in the country by making money cheaper and more readily available. Inflation is thought to have a positive effect on economic growth by increasing corporate profits and workers’ wages.
Inflation in Japan has risen during the pandemic, but is still far below the levels of other countries. AugustAnd Bank of Japan officials believe the low interest rates are the wrong kind of inflation, caused by pandemic-related supply constraints rather than the intended consumer-driven demand.
Following the government’s dollar-selling maneuvers on Thursday, the yen briefly fell slightly below 141 before falling again.
Suzuki said the government would not disclose details of the scale or timing of the intervention.
Japan had previously intervened in the appreciation of the yen during the 1998 Asian financial crisis when the yen was trading around 146 to the dollar. In 2011, it tried to devalue the currency.
Hisako Ueno contributed to the report.